This week's price trend shows that the Bitcoin bulls are a bit too enthusiastic about the expiration of the $3 billion Bitcoin option last Friday. The combined effect of various bearish factors this week was enough to bring the price of Bitcoin to its lowest level in 46 days, which almost erased the $2 billion September call (buy) option that expired on September 24. %.
There is still room for some surprises, especially considering that the deadline is 8:00 UTC September 24. However, the motivation for shorts does not seem to be great, because the test of less than $40,000 on September 21 resulted in the liquidation of less than $250 million in futures contracts.
On September 22, Evergrande Group confirmed that it would pay interest on onshore bonds, which eased some concerns about default. Despite this, investors still expect the company to miss the dollar-denominated bonds held mainly by international investors.
The recent volatility above the 48,000 USD on September 18th and 19th was not enough to break the resistance of the 20-day moving average. Considering that concerns about the spread of China's debt crisis have passed its peak, bullish people still hold the hope of "returning to the mean". In addition, the chairman of the US Securities and Exchange Commission (SEC) Gary Gensler did not take any short-term actions in an interview with the Washington Post on the 22nd.
If historical data has an impact on the price of Bitcoin, then in the past five years, the performance in September has been negative for four years. If Bitcoin's September closing price is lower than its August 31 closing price of $47,110, this bearish trend will continue.
The options that expire every month in September will be a strength test for the bulls, because 86% of the US$2 million call (buy) options are priced at US$46,000 or higher. Therefore, if BTC trades below this price on September 17, the open interest in neutral to put options will be reduced to $285 million.
Call option is the right to buy Bitcoin at a predetermined price on a set expiry date. Therefore, if Bitcoin falls below this price at 8 am UTC on September 24, the $50,000 call option will become worthless.
The bulls dominate the Bitcoin price, but they are overconfident
From a broader perspective, call options have great advantages, because the total open interest of call (buy) option instruments is US$2 billion, which is equivalent to 90% of put options from neutral to put.
However, this data is misleading, because the bulls’ over-optimism may cause most of their bets to go to waste. Even the $1.05 billion in open interest from put (sell) options is sufficient to balance these competitive forces.
The following are the four most likely scenarios considering the current price level. An imbalance that benefits either party represents the potential profit after maturity. The following data shows how many contracts will be available on Friday, depending on the expiration price.
Between US$38,000 and US$40,000: 3,390 call options, 8,695 call options. The net income is $21 million, which helps protect bearish (bear market) instruments.
Between US$40,000 and US$46,000: The net result between bears and bulls is balanced.
Between US$46,000 and US$50,000: 11,820 call options and 3,050 put options. With a net income of 42 million US dollars, it is bullish on call options.
Above $50,000: 16,370 call options and 1,400 put options. The bullish instrument will lead by $75 million.
This rough estimate naively believes that call (buy) options are only used for bullish strategies, and put (sell) options are only used for neutral to bearish trading. At the same time, real life is not so simple, because more complex investment strategies may have been deployed.
In order to keep the price of Bitcoin below US$46,000, the government introduced incentives
Buyers and sellers will do their best within a few hours before expiration on Friday. The bear will try to reduce losses by keeping the price below $46,000. On the other hand, if BTC stays above this level, the bulls can control the situation well.
Is the US$75 million profit large enough to support an increase of more than US$50,000? Not true, but as mentioned earlier, these are simplified estimates. This will mainly depend on the layout of the market maker and arbitrage department, which is a game that anyone can guess.
Before Friday, the market still has room for further volatility, but despite the gorgeous $3 billion headline, both sides look quite balanced.
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